LDC reports 20% drop in first-half 2019 profits

Louis Dreyfus Company (LDC) has a reported a 20% drop in first half profits of 2019, as it deals with the impact of global trade tensions and the spread of African swine fever (ASF) affecting soyabean demand.

On 7 October, the Dutch agribusiness posted net earnings of US$73M from continuing operations in the six months to June, down 20% from US$91M in the same period last year.

“Global trade tensions, erratic weather conditions, the spread of ASF in Asia and a general context of oversupply made it difficult to analyse and act upon market fundamentals, underlining our achievement for the period,” said Ian McIntosh, LDC’s CEO.

“We see these adverse market conditions persisting during the second half of 2019 and expect a recovery in profitability in 2020 as we continue to implement our business plan.”

Export volumes fell 6.5% partly because China purchased less soyabeans due to the spread of ASF, which had ravaged the country’s pig population.

Additionally, LDC was also affected by higher volatility in agricultural prices caused by the US-China trade war as well as chronic overcapacity, which had crimped margins across the industry.

The company’s adjusted net debt was US$3.2bn or three times the company’s earnings before interest, tax depreciation and amortisation of the past year.

LDC’s equity value fell to US$4.63bn, down from US$4.98bn, and its return on equity was 6.5%. However, the company generated US$709M of cash from operating activities in the first half of the year, against an outflow of US$72M a year ago, World Grain reported.

In 2018, the company reorganised its platforms between two segments. The value chain segment now included grains, oilseeds and juice along with freight and global markets. The merchandising segment comprised the sugar, coffee, cotton, rice and dairy platforms with more consumer-centric business models.

This year, the value chain segment posted operating results of US$225M, down 29.9% from US$321M the previous year.

The merchandising segment recorded operating results of US$270M, up 35% from US$200M for the first six months of 2018.

However, overall segment operating results stood at US$495M for the first six months of 2019, down from US$521M in the same time last year.

World Grain wrote that the oilseed platform’s performance remained resilient, thanks to its diversity of products.

LDC is a leading merchant and processor of agricultural goods and a member of the so-called ABCD group, along with agribusinesses Archer Daniels Midland (ADM), Bunge and Cargill.

The company has been operating since 1851 with a portfolio to include encompassing grains and oilseeds, as well as coffee, cotton, juice, rice, sugar and freight. It transports 80M tonnes of products a year and is active in over 100 countries.